Financial News

Barclays Warns Investors Of Staff Bonus Hike

Barclays has put leading shareholders on alert by signalling it may increase the proportion of its investment banking revenue it pays out in bonuses, undermining its new boss' claims it is exercising greater restraint on staff pay.

Sky News has learned Barclays is likely to announce at its annual results next month that its compensation-to-net-income ratio rose from 39% at its investment bank in 2012 to more than 40% last year.

Insiders cautioned that the numbers were still being finalised and could yet change ahead of the announcement on February 11.

The metric, which encompasses base salaries as well as bonuses, is significant because it is closely watched across the City and Wall Street as an indicator of the generosity of investment banks' pay policies.

Sir John Sunderland, the Barclays non-executive director who chairs the bank's remuneration committee, is said to have briefed a number of investors that the compensation-to-net-income figure was likely to rise because of the ongoing costs associated with recruiting staff and prior bonus commitments.

The communication has unsettled some investors although Barclays is likely to avoid a full-blown row over the issue if it continues, as expected, to rebalance distributions between shareholders and employees.

Antony Jenkins, Barclays' chief executive, has punctuated his 16 months in the job with repeated references to making Barclays 'the go-to bank' for customers and other stakeholders.

Mr Jenkins and his chairman, Sir David Walker, have pledged that pay restraint will form an important element of that.

However, the prospective rise in the proportion of revenue paid out to staff will jar because the trend during the recent round of Wall Street bank results has been in the opposite direction.

Banks have complained that new European Union pay rules will make it harder to demonstrate greater pay discipline because a higher proportion of employee rewards will be fixed than has been the case historically.

On Wednesday, Barclays said it would update the market on efforts to strengthen its balance sheet next month, but denied reports that it was planning to axe up to a quarter of its 1,600 UK retail branches.

"Compared to previous guidance, including the 2013 cost target of £18.5bn excluding £1.2bn costs to achieve Transform, the results will include additional approximate charges against costs of £220m and against income of £110m in the Investment Bank in Q4 relating to litigation and regulatory penalties," it said in a statement.

Sky News revealed on Tuesday that Barclays was planning to cut several hundred investment banking jobs and had authorised a ban on all employee travel for internal meetings. It also demanded that executives restrict themselves to international travel only for "essential" discussions with clients and regulators.

The edict, which is understood to have signed by chief financial officer Tushar Mozaria earlier this month, comes as Mr Jenkins prepares a new wave of job cuts that insiders said was likely to impact on highly-paid directors and managing directors at its investment banking division.

Around 1,700 jobs were cut in the unit last year, with several hundred more expected to be shed in the next few weeks, said a person familiar with Barclays' plans.